The Tax Cuts and Jobs Act (the “Act”) became law in December, and now would be a good time to begin reviewing its implications for your compensation plans and other benefits arrangements. The Act makes the most sweeping changes to the Internal Revenue Code (“Code”) in over 30 years. While tax-qualified plans and non-qualified plans were hardly affected by the Act, the following significant changes were made:
- Covered employees of publicly traded companies for which the company is subject to a one million dollar annual limit on tax deductible compensation under Code Section 162(m) are now considered covered employees forever, even after termination of employment. Compensation paid under arrangements entered into on or before November 2, 2017 may be excepted.
- The “qualified performance-based” compensation exception to Code Section 162(m) has been eliminated.
- The deductibility of many common employer-provided fringe benefits has been altered.
Please see the accompanying News Alert for important information regarding how the Act affects the taxation of compensation and employee benefits.